Harvard Business School is the world’s most expensive full-time MBA program, with tuition and required fees eclipsing $106,000 for two years. It pays off: Havard Business School graduates earn more money over the span of their careers than those from any other school. Harvard degree holders earn more than $3.9 million during their careers compared to $3.5 million for those from University of Pennsylvania’s Wharton school and $3.3 million for those who got their MBAs from Columbia University, reports Bloomberg BusinessWeek on its website. “It’s the trickle-down effect,” says Robert Dammon , associate dean and professor of financial economics at Carnegie Mellon University’s Tepper School of Business in Pittsburgh. The kinds of students that the best schools attract are going to get the highest paying jobs.” With few exceptions, Dammon is correct. The top ranked–and most expensive — MBA programs produce the highest salaried grads over the span of their careers, according to research commissioned by Bloomberg BusinessWeek. For the second year, Bloomberg Businessweek asked PayScale , a company that collects salary data from individuals through online pay comparison tools, to use its database of 23,000 MBA graduates at the top 45 U.S. business schools to calculate their median cash compensation — salaries and bonuses — around graduation and after they have an average of 5, 10, 15, and 20 years of work experience in the same industry. Bloomberg Businessweek then used that data to calculate an estimate of median cash earnings over the entire 20-year span. Lifetime Earnings On average, MBAs from the top 45 business schools will make about $2.5 million in base pay and bonuses over the course of a 20-year career. There are great differences between the total compensation of the schools at the top of the list compared to those closer to the bottom, especially as MBAs move deeper into their careers. An MBA graduate from the Tippie College at The University of Iowa will earn less than half that of a graduate of Harvard, in Cambridge, Massachusetts. Newly-minted MBAs at some programs, such as Yale University in New Haven, Connecticut, earn high starting salaries, but experience a only a minimal increase over time. At other schools, like the University of Connecticut, MBA grads more than double their salaries over the 20-year timeframe. The numbers don’t include stock or options, and the pay data for some smaller schools at the 20-year mark may be based on fewer than 100 pay reports. They also do not track the same graduates over time; they reflect the experience of individuals who graduated at various points throughout the last 20 years.[wp_campaign_1]
Highest Pay Paul R. Dorf , managing director of Compensation Resources, Inc., a consulting firm in Upper Saddle River, N.J. that specializes in executive compensation, says it’s not a surprise that the best known schools have the highest pay numbers. “The cream-of-the-crop companies hire the cream-of-the- crop grads,” Dorf says. “Someone with an MBA from Wharton not only has a better shot at getting a job, but also getting more money.” On average, graduates from the top 45 MBA programs experience a 75 percent pay increase over the 20-year span, almost identical to the U.S. median for all employees, according to PayScale data. Salaries for those from Georgia Tech and the University of Connecticut more than double two decades into their careers, and MBAs from George Washington University enjoy a 114 percent increase in salary over the span of 20 years. However, the total compensation number for George Washington graduates over that period amounts to only half of what a Harvard MBA will make. Smaller Increases On the other end of the spectrum, MBAs from the University of Michigan’s Ross School of Business only get a 32 percent pay jump, and grads from Yale, Massachusetts Institute of Technology’s Sloan School of Management, and Dartmouth College’s Tuck School of Business experience a 46 percent rise during their careers. It’s unclear why graduates from top schools might not fare as well as others over the long haul, but one possibility is that the b-school world has changed. Twenty years ago, recruiting was concentrated in a handful of schools; today companies may hire from dozens. Overall, salaries for new grads are down about three percent this year compared to 2009 thanks to the economic decline. “Being an MBA hasn’t suddenly become the same as flipping burgers at McDonald’s , but there has been a downward trend overall,” says Al Lee, director of quantitative analysis at Payscale. Lower Base Salaries This is bad news for newly-minted MBAs entering the workforce this summer, as starting at a lower base salary could have career-long repercussions. “The differences might not seem like a lot now, but over time it will be very hard to recoup that lost income,” Dorf says. “Over 20 years, the difference will grow exponentially.” At Dartmouth, starting salaries dropped 7.5 percent to $124,000 compared to last year. Similarly, at Wharton–the program with the highest average salary at graduation–the median compensation of MBA graduates fell 5.5 percent to $137,000. “These are schools known for investment banking and consulting, areas where salaries have dropped off a bit,” Lee says. The news is more positive for MBAs further along in their careers. Overall, MBA grads at the 20-year mark actually experienced a 2 percent increase in pay compared to last year. Kinds of Jobs The main pay differentiators between schools are the kinds of jobs graduates seek. At Wharton, 80 percent of MBA grads go into finance and consulting jobs at companies such as McKinsey and Bain. Similarly, 76 percent of MBA grads from Columbia get jobs in the same two industries, pushing the school’s median starting salary to $119,000. “Industry is everything,” says Andy Chan, vice president for career development at Wake Forest University. “If you look at the (mix) of industries that schools like Stanford, Harvard, and MIT send students into compared to everyone else, it accounts for the biggest difference in salary.” Graduates from Michigan’s Ross School brought home a median salary of $107,000 according to PayScale. At Michigan, almost as many students go into marketing and sales positions as finance, with large numbers of students joining companies like Amazon.com , Kraft Foods , and Procter & Gamble . Location also plays a role in the compensation differences, or, what Tepper’s Dammon calls the “New York premium.” While MBAs from Wharton and Columbia tend to flock to Wall Street, where a cost-of-living premium boosts salaries, most Ross grads stay in the Midwest.
Midwest Jobs The same is true at Southern Methodist University’s Cox School of Business. While 45 percent of Cox MBAs go into finance, three out of four grads remain in the southwest, where salaries are lower than those in the northeast. At Cox, recent MBA grads earned a median salary of $77,200, significantly less than the $90,860 average median across all 45 programs. According to PayScale’s Lee, there hasn’t been a good hiring year for MBAs since 2007. There are signs of hope: nine of the 45 top MBA programs experienced small upticks in starting salaries in 2010, including Notre Dame’s Mendoza College of Business and Boston University. While the increases are only a few hundred dollars, they could mean a much larger payoff 20 years down the road. To contact the reporter on this story: Geoffrey Gloeckler in New York at ggloeckler@bloomberg.ne
SOurce: http://industry-news.org/2010/05/24/harvards-mba-graduates-earn-most-in-lifetime-among-mba-schools-surveyed/